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Moody's assigns A3 ratings to PPG's new notes

22 Feb 2018

New York, February 22, 2018 -- Moody's Investors Service assigned A3 ratings to PPG Industries,
Inc.'s proposed senior notes. The company anticipates
using the proceeds from these notes for general corporate purposes.
The rating outlook is negative.

"The A3 rating can withstand modestly higher gross debt levels compared
to year-end 2017, but any significant and sustained increase
in debt could threaten the rating absent meaningful and sustained improvement
in earnings and cash flow," said Ben Nelson, Moody's
Vice President -- Senior Credit Officer and lead analyst for PPG
Industries, Inc.

Assignments:

..Issuer: PPG Industries, Inc.

....Senior Unsecured Regular Bonds/Debentures,
Assigned A3

RATINGS RATIONALE

PPG's A3 ratings reflect the company's leading market positions
in coatings, healthy profit margins, low capital intensity,
and the strength and stability of expected cash flows relative to other
rated chemical companies. Near-term challenges include relatively
slow global economic growth in mature regions that account for the majority
of the company's revenues, raw material headwinds after an
extended period of beneficial tailwinds, and potential volatility
related to currency movements. Longer-term challenges include
a clear disposition toward acquisitions and shareholder remuneration over
debt reduction and less business diversity as the company has exited various
non-core businesses in recent years.

PPG has strong credit metrics for the A3 ratings on a trailing twelve
months basis, as the company heads into a phase of elevated capital
deployment during what is expected to be a challenging business environment
at least in the near-term. Moody's calculates adjusted
financial leverage near 2.0x (Debt/EBITDA), adjusted net
financial leverage near 1.5x (Net Debt/EBITDA), retained
cash flow-to-net debt near 41% (RCF/Net Debt) and
free cash flow-to-net debt near 19% (FCF/Net Debt)
for the twelve months ended 31 December 2017. The company also
reported $1.5 billion of cash and short-term investments
at 31 December 2017. Given the expectation that PPG will deploy
$2.4 billion of capital for acquisitions and share repurchases
in 2018, which is well in excess of anticipated free cash flow,
Moody's expects that key credit measures will weaken somewhat in
2018 with retained cash flow-to-net debt falling toward
30% and adjusted net financial leverage moving just over 2.0x
assuming a significant portion is devoted to share repurchases.
Moody's does not believe that a continuation of the planned level
of capital deployment in 2018 is sustainable in the medium term within
the A3 ratings. Increasing gross balance sheet debt to above $5
billion on a sustained basis could threaten the rating unless Moody's
expects meaningfully and sustainably increased earnings and cash flow
generation. The company did not have any outstanding commercial
paper at 31 December 2017, does not have meaningful debt maturities
in 2018, and has just under $660 million of debt maturities
in 2019.

The negative outlook reflects continued event risk following multiple
bids for AkzoNobel in 2017, which in Moody's view constituted
a change in financial policies given the contemplation of a large transaction
that likely would have resulted in at least a one-notch downgrade
to PPG's ratings, and an increased likelihood that PPG's
credit metrics will not remain supportive of the A3 rating over the rating
horizon. Moody's could downgrade the rating with expectations
for adjusted net financial leverage sustained above 2.5x (Net Debt/EBITDA),
retained cash flow-to-net debt sustained below 25%
(RCF/Net Debt), or free cash flow-to-net debt sustained
below 10% (FCF/Net Debt). Moody's could also lower
the rating if capital deployment was expected to be sustained in excess
of internally-generated free cash flow or if the company pursued
a debt-funded acquisition without very clear plans about returning
credit metrics to levels appropriate for the A3 ratings within 18-24
months. Moody's could upgrade the ratings with expectations
for adjusted financial leverage sustained below 1.8x, retained
cash flow to debt sustained above 35%, and free cash flow
to debt sustained above 20%.

Headquartered in Pittsburgh, Pa., PPG Industries,
Inc., is a global coatings company with more than 100 manufacturing
facilities in more than 60 countries serving customers in the construction,
consumer products, industrial, and transportation markets.
PPG generated just under $15 billion of revenues from continuing
operations in 2017.

The principal methodology used in these ratings was Chemical Industry
published in January 2018. Please see the Rating Methodologies
page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

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